What are permissioned blockchains and permissionless blockchains?

Anyone can use permissionless blockchains. If you meet specific requirements, you can even participate in their consensus mechanisms. Bitcoin, Ethereum, and BNB Chain are all permissionless blockchains, typically characterized by transparency and decentralization.

Permissioned blockchains require an invitation to join. They are often used in private enterprises and tailored for specific use cases. Power is held by a small group of validators who can make most network decisions. Transparency may be affected, but network update speed and scalability are often significantly improved.

Introduction

Have you ever thought about what type of blockchain you are using? Besides Proof of Work(PoW) and Proof of Stake(PoS), what other classifications are there? In fact, blockchains can be divided into permissioned and permissionless types. Understanding these two types helps you gain deeper insight into the characteristics of blockchain and its high liquidity.

What is a permissioned blockchain versus a permissionless blockchain?

There is more than one type of blockchain. One of the most effective ways to distinguish blockchain types is to determine whether the chain is permissioned or permissionless. You may already be familiar with the category of permissionless blockchains. For permissionless blockchains, anyone can participate in usage and operation, directly access the network, and participate in the validation process. Bitcoin, BNB Chain, and Ethereum are all permissionless blockchains.

On permissioned blockchains, users must be granted permission to join. Permissioned blockchains are often used in private scenarios, such as within an organization or enterprise. For example, a company might use the Hyperledger Fabric blockchain framework to create a permissioned blockchain for its supply chain system. To join this network, you need explicit approval from an administrator.

History and Background

Blockchain technology dates back to Satoshi Nakamoto’s Bitcoin white paper. The blockchain technology introduced in that white paper belongs to permissionless blockchains, where unconnected users reach consensus on the chain. Because the Bitcoin model has influenced multiple generations of blockchains, the trend of permissionless blockchains continues. The values and spirit conveyed by Bitcoin and subsequent cryptocurrencies align perfectly with public permissionless blockchains.

The features of blockchain are also attractive for private scenario applications. The immutability, transparency (in certain aspects), and security of blockchain motivate the creation of networks with higher access restrictions.

To realize this idea, blockchain developers have created permissioned blockchain frameworks, and some have tailored blockchains for third parties. As mentioned earlier, Hyperledger Fabric is a permissioned blockchain framework. Quorum, MultiChain, and Ethereum Geth also provide permissioned blockchain frameworks for enterprises.

Main Features

The following features do not always apply to all permissioned and permissionless blockchains. But generally, most blockchains exhibit these obvious characteristics.

Permissioned

Permissionless

Transparency

Limited

Fully Transparent

Users

Invited Users Only

Anyone

Digital Assets/Tokens

Rare

Common

Consensus Update Process

Short Time

Long Time

Scalability

Controllable

Hard to Control

Network Permissions

Centralized

Decentralized

Advantages of Permissionless Blockchains

Potential for Decentralization. Not all permissionless blockchains are fully decentralized, but they often have a high potential for decentralization. Users can freely join the consensus mechanism or use the permissionless blockchain network within their capabilities.

Collective Consensus. Users can actively participate and modify network settings. Validators and network users enjoy high voting rights, and disagreements over changes may lead to blockchain forks.

Easy Access. Permissionless blockchain networks are easy to access, with relatively low entry barriers. Anyone can create a wallet and join.

Disadvantages of Permissionless Blockchains

Low Scalability. Permissionless blockchains need to handle large user bases and high traffic loads. Upgrading the network to improve scalability requires collective consensus to implement effectively.

Malicious Attacks. Since anyone can join permissionless blockchains, these networks are always vulnerable to malicious attacks.

Over-Transparency. The information on permissionless blockchains is often publicly accessible, which can lead to potential privacy and security issues.

Advantages of Permissioned Blockchains

High Scalability. Permissioned blockchains are often operated by entities with certain control over validators, making network upgrades relatively easy.

Customizable. Permissioned blockchains can be created for specific goals, enabling efficient implementation of particular functions. Changes to settings are also easier to achieve.

Controlled Transparency. Operators of permissioned blockchains can adjust the network transparency according to the use case.

Invitation-Only Access. You can precisely control who is allowed to join the permissioned blockchain.

Disadvantages of Permissioned Blockchains

Centralization. Power may be concentrated in a central entity or a small group of validators chosen by the blockchain owner, which means decision-making may not consider all stakeholders.

Susceptible to Attacks. Permissioned blockchains often have fewer validators, making their consensus mechanisms more vulnerable to attacks.

Censorship Risks. Permissioned blockchain operators may collude or update the network, risking censorship. If enough participants agree, information on the blockchain could be altered.

Should I Choose a Permissioned or Permissionless Blockchain?

The answer is simple. If you want to create a network open to everyone, you should choose a permissionless blockchain. However, creating a permissionless blockchain does not mean you must adhere to standard principles and goals. In fact, your blockchain can be both centralized and permissionless. If you wish, you can also increase the privacy of a permissionless blockchain.

If you want to apply blockchain in private scenarios, such as within enterprises or government agencies, permissioned blockchains are often more suitable. Similarly, your permissioned blockchain can be designed to be fully open and transparent, deviating from traditional permissioned chain features.

Conclusion

As a cryptocurrency investor or trader, you may only encounter permissionless blockchains, but understanding the difference between permissionless and permissioned blockchains is harmless and beneficial. People tend to have a single view of distributed ledger technology (DLT), believing it should be a transparent, open, and decentralized cryptocurrency model. But these elements can all be changed—in fact, many private enterprises adopt permissioned blockchains that do not conform to traditional norms. **$PORTAL **$PORTO **$POWER **